Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>San San should benefit from an end to Covid restrictions as employees start to network again, with revenue driven to some extent by the volume of business cards that are digitised</li>
<li>San San remains in the early stages of its growth cycle as corporate Japan embraces digital transformation</li>
<li>Q1 Sales growth +25% YoY, accelerated from 19% YoY the previous quarter</li>
<li>Bill One, a new invoicing platform, is starting to contribute</li>
<li>The stock has run up 52% YTD, one of the top performers among large cap SaaS companies in Japan </li>
<li>Trading at 18x TTM Revenue the stock is cheaper than peers</li>
</ul>


San San should benefit from an end to Covid restrictions as employees start to network again, with revenue driven to some extent by the volume of business cards that are digitised
San San remains in the early stages of its growth cycle as corporate Japan embraces digital transformation
Q1 Sales growth +25% YoY, accelerated from 19% YoY the previous quarter
Bill One, a new invoicing platform, is starting to contribute
The stock has run up 52% YTD, one of the top performers among large cap SaaS companies in Japan 
Trading at 18x TTM Revenue the stock is cheaper than peers


San San (4443) - Networking, Not Net Working

<a href="https://www.smartkarma.com/entities/sansan-inc" target="_blank" data-smartkarma-citation="entities:28112:1" rel="noopener">Sansan Inc (4443 JP)</a>  has corrected 15% since the company issued a profit warning last week. The final figures have now been released. That is the end of the "bad news." The outlook and guidance for FY5/22 is more upbeat. The company expects sales growth to accelerate from 21% last year to ~26% this year, as the impact from the pandemic fades. Given the increased spend on marketing and personnel, we would expect to see a pick up in the key KPIs, customer acquisition and ARR (annual recurring revenue). The 3 catalysts to BUY the stock: 1) post correction the stock trades at an attractive 13x NTM EV/sales, 2) Key KPIs, customer acquisition and ARR, are recovering and 3) passive flow from potential FTSE All-World Index inclusion (<a href="https://www.smartkarma.com/insights/ftse-geis-sep21-index-rebalance-preview-japan-edition" target="_blank" data-smartkarma-citation="insights:53004" rel="noopener">FTSE GEIS Sep21 Index Rebalance Preview: Japan Edition</a> )

Sansan Inc (4443 JP)  has corrected 15% since the company issued a profit warning last week. The final figures have now been released. That is the end of the "bad news."  The outlook and guidance for FY5/22 is more upbeat. The company expects sales growth to accelerate from 21% last year to ~26% this year, as the impact from the pandemic fades. Given the increased spend on marketing and personnel, we would expect to see a pick up in the key KPIs, customer acquisition and ARR (annual recurring revenue). The 3 catalysts to BUY the stock: 1) post correction the stock trades at an attractive 13x NTM EV/sales, 2) Key KPIs, customer acquisition and ARR, are recovering and 3) passive flow from potential FTSE All-World Index inclusion (FTSE GEIS Sep21 Index Rebalance Preview: Japan Edition )

<div>
<ul>
<li>
SanSan surprised the market with a profit warning after the market close on 7 July.   
</li>
<li>
Two trading days later, the stock was down 12%.   
</li>
<li>
Rather than focusing on Sales Growth continuing, the market may be overly focused on Operating Profit coming in under estimates.  
</li>
<li>
Our outlook remains positive.  
</li>
<li>
Share Price: ¥8,730, Market Cap: $2.5b, EV/TTM Rev:  17x</li>
</ul>
</div>




SanSan surprised the market with a profit warning after the market close on 7 July.   


Two trading days later, the stock was down 12%.   


Rather than focusing on Sales Growth continuing, the market may be overly focused on Operating Profit coming in under estimates.  


Our outlook remains positive.  


Share Price: ¥8,730, Market Cap: $2.5b, EV/TTM Rev:  17x



Japan Small Cap Growth - Sansan (4443) | Still a Long Way to Go

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor ("LF") of 0.75 to derive the final FFW used for index calculation.In <a href="https://www.smartkarma.com/insights/topix-index-upweights-the-big-april-basket-2021" target="_blank" data-smartkarma-citation="insights:49660" rel="noopener">TOPIX Index Upweights: The Big April Basket 2021</a>, I discussed how the Tokyo Stock Exchange reviews this Liquidity Factor every April and highlighted 50 names (the "Big April Basket 2021") that could potentially have their liquidity factors removed in this April's review.<div class="content-highlight">
Today after the close, the official review results were announced and 48 out of 50 names in our Big April Basket 2021 were correct translating to a hit ratio of 96%. There were 11 other names added, and two of the names we expected to see the LF lifted did not. 
As of today's close, our Big April Basket (equally-weighted) is up +3.61% against the TOPIX Index in 7 trading days (since the close of the day after the insight) and there could be more to come. 
</div>Below is a discussion on the details of the official review results and what changes are required for our basket strategy during the event-leg which could run until the end of April.

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor ("LF") of 0.75 to derive the final FFW used for index calculation.In TOPIX Index Upweights: The Big April Basket 2021, I discussed how the Tokyo Stock Exchange reviews this Liquidity Factor every April and highlighted 50 names (the "Big April Basket 2021") that could potentially have their liquidity factors removed in this April's review.
Today after the close, the official review results were announced and 48 out of 50 names in our Big April Basket 2021 were correct translating to a hit ratio of 96%. There were 11 other names added, and two of the names we expected to see the LF lifted did not. 
As of today's close, our Big April Basket (equally-weighted) is up +3.61% against the TOPIX Index in 7 trading days (since the close of the day after the insight) and there could be more to come. 
Below is a discussion on the details of the official review results and what changes are required for our basket strategy during the event-leg which could run until the end of April. 

TOPIX Upweights: Big April Basket 2021 Pre-Event Is a WIN! Now the Event-Leg!

During the month of February 2021, one of the most anticipated TOPIX Inclusion candidates, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> completed its TOPIX Inclusion Event. We also saw four new names announce their TSE1 moves during this month, among which was <a href="https://www.smartkarma.com/entities/faithnetwork-co-ltd" target="_blank" data-smartkarma-citation="entities:29132:1" rel="noopener">FaithNetwork Co Ltd (3489 JP)</a> the third stock out of the four pre-event bets highlighted in <a href="https://www.smartkarma.com/insights/topix-inclusion-trade-summary-sep-2020" target="_blank" data-smartkarma-citation="insights:43700" rel="noopener">TOPIX Inclusion Trade Summary: Sep 2020</a>. During this month, we also introduced new pre-event picks to be added to our list in <a href="https://www.smartkarma.com/insights/topix-inclusions-who-is-ready-3-0" target="_blank" data-smartkarma-citation="insights:48306" rel="noopener">TOPIX Inclusions: Who Is READY? 3.0</a>. In this insight, I have provided performance updates for 4 "Live" event stocks which are expected to have Inclusion Events at the end of March/April 2021 and 17 "Post" event stocks that completed their Inclusion Events at the end of January 2021 and February 2021.

During the month of February 2021, one of the most anticipated TOPIX Inclusion candidates, Toshiba Corp (6502 JP) completed its TOPIX Inclusion Event. We also saw four new names announce their TSE1 moves during this month, among which was FaithNetwork Co Ltd (3489 JP) the third stock out of the four pre-event bets highlighted in TOPIX Inclusion Trade Summary: Sep 2020. During this month, we also introduced new pre-event picks to be added to our list in TOPIX Inclusions: Who Is READY? 3.0. In this insight, I have provided performance updates for 4 "Live" event stocks which are expected to have Inclusion Events at the end of March/April 2021 and 17 "Post" event stocks that completed their Inclusion Events at the end of January 2021 and February 2021. 

Japan

Sansan, Inc. provides mobile application software solutions. The Company offers business card management service by scanning the cards from scanner and smartphone. Sansan provides its services throughout Japan.

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Sansan Inc (4443 JP)

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TOPIX Upweights: Big April Basket 2021 Pre-Event Is a WIN! Now the Event-Leg!

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TOPIX Inclusion Trade Summary: Feb 2021

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